Time to get smart about smart meters

Smart meters are new energy meters designed to help reduce our household energy consumption and cut our bills by enabling us to monitor, in real time, exactly how much gas and electricity we're using.

The government plans to have them installed in all UK homes, businesses and public sector premises by 2019, but concerns have been raised over how the project will be funded and how much of the installation costs will be passed on to consumers.

So let's take a look at exactly what smart meters are and how they work, why we need them, the potential impact on our energy usage and - most importantly - how much they will cost to install versus how much they will save you.

What is so smart about smart meters?

Unlike the current crop of mechanical and digital meters, smart meters are designed to do much more than measure how much gas or electricity a household consumes each quarter.

They are fitted with a touch-screen display that gives real-time information on the amount of energy you are using at any given time of the day, week or year. They also send readings directly to your energy suppliers so there is no longer a need for estimated bills.

In an attempt to cut down on the amount of energy we are wasting, smart meters also display the amount of energy certain devices are using and how much this is costing you. For instance, you can see exactly how much money you are throwing away by leaving your phone charger permanently plugged in, overfilling the kettle or leaving your heating on while you are out.

Finding out exactly how much energy we are wasting, and how much this is costing us, can be a real eye-opener, and it is hoped that by giving us access to real-time data we will be able to identify areas where we can cut down our consumption and save money.

And smart meters have also been future-proofed as they can be remotely updated with software upgrades and so, as technology evolves, there will be no need to have the meters removed and new ones installed.

Why do we need smart meters?

The mass roll out of smart meters, which is scheduled to go live between 2014 and 2019, is part of the government's strategy to transform Britain into a low carbon 'green' economy.

In raising awareness of our energy consumption it is hoped that we will be more responsible with our use of gas and electricity which will help to maintain an affordable and sustainable energy supply.

Smart meters are also seen as a way of offering more affordable energy as you will only be billed on exactly what you are using. Energy suppliers should also be able to cut overheads as there will no longer be a need for anyone to read your meter.

So will smart meters save customers money?

The actual smart meters themselves will not cut your usage or your bill but it is hoped that enabling consumers to see the costs of energy usage in real time will encourage us to use energy more efficiently, which will lead to a reduction in both consumption and costs.

Smart meters will be available to both prepay and credit meter customers and there will be no installation or set up fees.

The cost of the meter and its maintenance will be covered by our energy bill, in the same way that we pay for existing meters.

However, this is causing concern among consumer groups who fear that the estimated £11.1billion cost of rolling-out the meters to around 30million UK homes and businesses will be passed directly on to customers.

Also, because there is no government input into the funding of the roll out - the entire £11.1billion cost will be met by the energy companies alone - there is a worry that providers have effectively been given free rein to make more money out of already financially stretched consumers.

This fear has been compounded by the fact that the estimated cost of the roll out has risen by £2billion in the last three years.

So while, on the face of it, the use of smart meters should make us more energy aware, energy efficient and, in turn, save us money, we will have to wait and see what costs the energy companies impose upon us to fund the mass roll out.